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October 21, 2022

IRS Announces 2023 Employee Benefit Plan Limits

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The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2023. All dollar limits that are subject to adjustment for cost-of-living increases will increase for 2023. Separate adjustment amounts were released by the Social Security Administration.

IN DEPTH


The IRS and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2023. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2022 and 2023.*

RETIREMENT PLAN LIMITS (guidance link) 2022 Δ 2023
Annual compensation limit $305,000 $330,000
401(k), 403(b) & 457(b) before-tax contributions $20,500 $22,500
Catch-up contributions (if age 50 or older) $6,500 $7,500
Highly compensated employee threshold $135,000 $150,000
Key employee officer compensation threshold $200,000 $215,000
Defined benefit plan annual benefit and accrual limit $245,000 $265,000
Defined contribution plan annual contribution limit $61,000 $66,000
Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period $245,000 $265,000
ESOP limit for determining the maximum account balance subject to the general five-year distribution period $1,230,000 $1,330,000
HEALTH AND WELFARE PLAN LIMITS (guidance links here and here) 2022 Δ 2023
Health Flexible Spending Accounts
Maximum salary reduction limit $2,850 $3,050
Health FSA Carryover Limit $570 $610
Dependent Care Flexible Spending Accounts±
If employee is married and filing a joint return or if the employee is a single parent $5,000 = $5,000
In employee is married but filing separately $2,500 = $2,500
Excepted Benefit Health Reimbursement Arrangements (EBHRAs) $1,800 $1,950±
Qualified Transportation Fringe Benefit and Qualified Parking (monthly limit) $280 $300
High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA)
HDHP - Maximum annual out-of-pocket limit (excluding premiums):
Self-only coverage $7,050 $7,500
Family coverage $14,100 $15,000
HDHP - Minimum annual deductible:
Self-only coverage $1,400 $1,500
Family coverage $2,800 $3,000
HSA - Annual contribution limit:
Self-only coverage $3,650 $3,850
Family coverage $7,300 $7,750
Catch-up contributions (age 55 or older)± $1,000 $1,000
SOCIAL SECURITY WAGE BASE (guidance link) 2022 Δ 2023
Social Security Maximum Taxable Earnings $147,000 $160,200

Plan sponsors should update payroll and plan administration systems for the 2023 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.

* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.

± Not indexed for cost-of-living adjustments, with the exception of limited guidance issued for certain years.

ALM expressly disclaims any express or implied warranty regarding the OnPractice Content, including any implied warranty that the OnPractice Content is accurate, has been corrected or is otherwise free from errors.

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